THE BUYER COSTS WHEN PURCAHSING A HOME IN ARIZONA
Buying a house is one of, if not THE, the biggest purchase in your life and it’s important to understand the associated costs. I’m sure that no one is surprised to hear me say that there are additional costs associated with buying a house, right? But what are they and how much are they going to cost?
I have represented lots of buyers in various situations, and I pride myself on helping my clients to understand all the costs associated with buying their home. No one wants to be sitting at the closing table, signing final documents, and learning about unexpected fees. I like surprises, but NOT those kinds of surprises.
Important Factors The closing costs in Arizona are usually very reasonable. They will depend on the price of the home, the location of the home, whether you’re getting a loan or paying cash, and so on. Let’s jump in and take a look at how much you need to be setting aside and what it’s for.
Buyer Costs you Need to be Aware Of
Likely, the first expenses you will have in the home buying process are the inspections. These will vary depending on the condition of the home and what inspections you want to have done.
#2 LENDER FEES
Assuming you are getting a loan, your lender has costs and fees associated with putting your financing in place. This includes things like appraisal, credit reports, wire transfer fees, commissions, and so on. Additionally, if you are planning to buy points upfront, to reduce your interest rate in the long run, this can drastically increase your closing costs. I recommend that you sit down with your lender early in the process to understand what their fees are depending on the type of financing you need. If you are paying cash, you can ignore this altogether.
#3 TITLE/ATTORNEY FEES
In Arizona, very few home purchases require an attorney and most people choose to use a title company to handle the transaction. Either way, they will have fees and costs associated with ensuring that the title for your new home is put into your name.
#4 ESCROW FEES
Your escrow officer will ensure that the money you pay to purchase your new home is dispersed to the appropriate parties and finally to pay the remaining balance to the seller. Examples of the things that the escrow officer adjusts and handles payment of are HOA fees, community fees, taxes, insurance, the seller’s mortgage, and more. As the Buyer, you will also be responsible for your share of the escrow fees.
Your lender will typically require that you pay the interest due on your mortgage for the period between your closing date and the first day of the next month in advance.
Some utility companies require an initial upfront deposit before they will activate services.
Most lenders require your new home insurance pad for n advance for one year
#8 BANK FEES
This one is usually insignificant but you may want to keep in mind that when you are paying your earnest money or sending the funds to close you may need a cashier’s check or wire. Often there is a nominal charge from your bank for this service.
So, there you have the basic Buyer Costs!
Overall, we would recommend setting aside anywhere from 1-3% of the home’s purchase for closing costs. Why such a big range? Well, because it depends on so many factors that will be unique to your transaction. If you are paying cash you should be okay closer to that 1% mark, but if you’re getting a loan and planning to buy points, you’ll want to budget closer to that 3% mark.
I had budgeted for more than 2% and were pleasantly surprised when it came in lower, so I encourage you to do the same. We were able to put the additional money towards some things noted in the inspection report. Work with your lender or REALTOR®, to get a good handle on closing costs in the area and price point you are looking at.
Before closing, you’ll get a full property report that explains value, comps, neighborhood and all facts you need to know everything about the property. Here is a sample of detailed closing costs on a property at $300000 with 10% down.
- House Price – $300,000
- Down Payment – $30,000
- Interest Rate – 3.25%
- PITI – $1,562.06
- Closing Cost – $6,986.16 (Typically in a seller’s market like it is at the time of this blog, closing costs are harder to write into the contract)
- Bring to Closing – $36,986.16
*This is an example only and different rates may apply